Who keeps to down payment?

Elkhart Indiana. My husband and I purchased a second home for my brother and his wife, because they had a poor credit history. They provided a 12,000.00 down payment on the home. We had a verbal agreement that we would draw up a land contract, they could file it and build up their credit history, and then refinace the home in their own names. The contract was drawn up, but never signed or filed. Now 8 months later they have decided to divorce. The sister in law is demanding the full 12,000.00 back. I could maybe see her getting 6,000.00. not the whole amount. For the past two months my brother has not been able to come up with the full mortgage payment, so we have had to contribute to make up the balance. This home is owned in our name. Can she sue us for this 12,000.00?

[HomeGuru]

Yes, she can sue but she will not win. She has an equity interest in the property.